COVID19: Great Gig In The Sky?
Picking up where COVID19: Pig In A Poke? left off... we've Nattered about crowded environments, transmission, seasonal flu numbers, mortality rates, imagined vs real, the backdraft of draconian measures, predicted "superspreader" events, and pigs in a poke for many reasons. Unlike others, this was not to infer that COVID19 is much ado about nothing...
In tonight's offering for your perusal and contrarian horror, central bank monetary policy based in false doctrine, economic policy based in econometric falsity and the results of long term exposure to such on full display. The central bank wizards utterances, incantations and rate cuts can "fix" things because, these high priests are at large and in charge, right? After all that's what firmly anchored expectations, and CON-fidence therein is all about?
Answered loud and clear from our long term economic contraction, and the rubble of the repo ruckus: they won't, don't and get used to ever escalating repo intervention. Viz. it's a bailout because without it, the entire global financial system would collapse. Move on, nothing to worry about here. Contrary to false doctrine and misinformation, low rates shrink NIM and discourage lending viz this is a tight money policy.
Keeping interest rates low, zero or negative encourages financialism and punters, but does nothing to promote real economic investment. Any attempt to control the money stock, and an entire economy through the cost of credit (loan funds) is futile and a fools errand. The amount of money and bank credit supplied to the economy ALSO depends upon behavioral actions of the commercial banks and the public. And now this... a recent FED "explanation" for the repo ruckus.
To date, REPO IS STILL BROKEN as the dealers and banks are disintermediated and have withdrawn. Over the last 90 days the Fed has injected $440B into the banking system while absorbing 90% of UST issuance. Yet all 500 (on payroll) Phd's and all the Fed's men, can't figure out how to put "Humpty" back together again?
What does one think another 50 bps cut with IOER remaining above all other money market cost of loan funds will do? More of the same damage by supporting the zombie corps and households which infest a emasculated service based economy. Cocktail for disaster? In January, RMBS $160B issuance +25% YOY so let's lower rates which raise refi CPR's and duration risk. Now the MBS that few want to hold in this ruckus might become a really hot potato? Simply brilliant.
The more the central banks cut, the worse it gets, and they continue to cut? The definition of insanity and addiction applies. Begging the question... are long term contraction, reduced capacity, economic malaise and bubblicious asset markets caused by COVID19? Or a cerebral virus on the part of management viz deluded policy makers and greedy management drunk on their own credentialed hubris and spiked punch?
Aside from serial creation and reflation of bubblicious asset markets, how are those rate cuts working out right about now? With a sudden viral loss of CON-fidence, the stock market bubble has exploded into bear territory -20%, some large over leveraged playas are on the verge of insolvency, and the already long term economic contraction (there never was a recovery) is headed into the depression dumper.
In summary, since the July 2019 rate cuts, a compromised domestic and global economic immune system, hosting a festering tumor like repo market replete with ongoing ruckus caused by duration risk plagued debentures, over medicated with increasing and permanent Fed "vaccine" booster shots, all of which have caused the comatose patient to code. Some econo-moron's are suggesting the Fed purchase equities? Just pull the plug and smother the patient with a pillow please. Long term global central bank rate induced demand anemia, economic contraction, and the insanity of another 50bps cut has resulted in nothing less than this in short order...
What can that chain reaction beget? For the economy and full of bull market, the above video subject, song and opening lyric are hauntingly apropos, I think...
As for a viral pandemic which as predicted should accelerate further mid to late March? What we are fighting against is not made of cells, can't keep itself in a stable state, does not make its own energy, and can only replicate when it occupies an area or host, from which it drains resources until dry. Lack of cell structure aside, sound familiar? The war against this novel virus will be an experiment in terror, which will expose systemic strength as well as weakness.
Worry not as much like the "terrorists" post 9/11, this bat virus will be the GO TO reporting "excuse du jour" for overpaid E-suite incompetence, repetitious monetary, economic, governmental policy blunders, and a lack of continuity and planning. At the end of the day, that single strand of RNA is not the real culprit for the markets and economic fallout. COVID19 is the Lee Harvey Oswald of viruses, patsy, fall guy, whipping post, scapegoat, trigger man and an agent of change for better or worse. For something that small (.06 to .14 microns) which many consider to not even be alive, and could have been pushed here by the cosmic wind, to only fall upon us from above, a great gig in the sky?
More to come in COVID19: The Sound Of Silence? Stay tuned, no flippin.
Recommended Reading:
2019 nCOV - Pleased To Meet You?
COVID19: Same Bat Time?
COVID19: Same Bat Channel?
COVID19: Secondary Infection?
COVID19: Bat Out Of Hell?
COVID19: Pig In A Poke?
Viruses - Lots of Them - Are Falling From The Sky
With a real pig in a poke driving Coronavirus stimulus, panic selling - buying and tasering for TP... Take home pay, retail grocery and freezer sales should see a boost?Boost this, since our last timely Nattering... an initial spike in ex-China cases gone viral, half off black gold, WHO pandemic seal of approval, cancelled ballers, a locked down Boot, USA ixnay travelers Europei, home work-lay offs en masse, drawn down credit lines, exploded spreads, and loads of oft parroted MSM misinformation such as central bank fiscal "stimulus".
In tonight's offering for your perusal and contrarian horror, central bank monetary policy based in false doctrine, economic policy based in econometric falsity and the results of long term exposure to such on full display. The central bank wizards utterances, incantations and rate cuts can "fix" things because, these high priests are at large and in charge, right? After all that's what firmly anchored expectations, and CON-fidence therein is all about?
The FOMC never had control which is illusory at best...Time to retweet this... #SPX $SPX #ES_F #Dow $NQ #NQ #NDX $RUT #DAX #FTSE $ES_F $YM_F $QQQ $Dow #Equities #Indices #Futures #FX #Commods #COVID19 https://t.co/4MrHcxFrGs— The Nattering Naybob (@NaybobNattering) March 3, 2020
Witness, continued policy blunders have managed to re-invert the curve and push us to real negative rates in short order...The FOMC lost control long ago. When they started talking YCC (Yield Curve Control) you knew they had thrown the towel in. This cut just seals the deal. #SPX $SPX #ES_F #Dow $NQ #NQ #NDX $RUT #DAX #FTSE $ES_F $YM_F $QQQ $Dow #Equities #Indices #Futures #FX #Commods #COVID19— The Nattering Naybob (@NaybobNattering) March 3, 2020
and excepting a very brief period at the end of September 2019, have kept IOER (the remuneration rate) above all money market rates (cost of credit) for several years. With ZERO risk guaranteed money parking at the Fed, and sponsored bankster welfare in repo arb, why would any financial institution take on additional risk and lend for little to no margin?THREE SHORT HOURS later... with IOER cut 50bps to 1.10, ONLY the 30 yr remains ABOVE at 1.569.#SPX $SPX #ES_F #Dow $NQ #NQ #NDX $RUT #DAX #FTSE $ES_F $YM_F $QQQ $Dow #Equities #Indices #Futures #FX #Commods #COVID19 @DiMartinoBooth https://t.co/caHaGSjaaO— The Nattering Naybob (@NaybobNattering) March 3, 2020
Answered loud and clear from our long term economic contraction, and the rubble of the repo ruckus: they won't, don't and get used to ever escalating repo intervention. Viz. it's a bailout because without it, the entire global financial system would collapse. Move on, nothing to worry about here. Contrary to false doctrine and misinformation, low rates shrink NIM and discourage lending viz this is a tight money policy.
Keeping interest rates low, zero or negative encourages financialism and punters, but does nothing to promote real economic investment. Any attempt to control the money stock, and an entire economy through the cost of credit (loan funds) is futile and a fools errand. The amount of money and bank credit supplied to the economy ALSO depends upon behavioral actions of the commercial banks and the public. And now this... a recent FED "explanation" for the repo ruckus.
In our in depth examination of the repo ruckus, amongst many of the items we covered, the problems in FICC netting viz collateral transformation and financialism bubble risks. Our analysis accurately diagnosed what IS the core problem, and which will only worsen with recent rate cuts. But I digress while beating my chest...It dances around the 13K# elephant. As ONLY WE Nattered 1. NOBODY wants MBS, think duration risk. With cuts, the MBS bolus festers viz refi CPR's 2. COVID19 March spike seals the deal. Code Stat! https://t.co/qp0gyPRyzthttps://t.co/KklGvyutsXhttps://t.co/V8zafIkVZS— The Nattering Naybob (@NaybobNattering) March 3, 2020
To date, REPO IS STILL BROKEN as the dealers and banks are disintermediated and have withdrawn. Over the last 90 days the Fed has injected $440B into the banking system while absorbing 90% of UST issuance. Yet all 500 (on payroll) Phd's and all the Fed's men, can't figure out how to put "Humpty" back together again?
What does one think another 50 bps cut with IOER remaining above all other money market cost of loan funds will do? More of the same damage by supporting the zombie corps and households which infest a emasculated service based economy. Cocktail for disaster? In January, RMBS $160B issuance +25% YOY so let's lower rates which raise refi CPR's and duration risk. Now the MBS that few want to hold in this ruckus might become a really hot potato? Simply brilliant.
The more the central banks cut, the worse it gets, and they continue to cut? The definition of insanity and addiction applies. Begging the question... are long term contraction, reduced capacity, economic malaise and bubblicious asset markets caused by COVID19? Or a cerebral virus on the part of management viz deluded policy makers and greedy management drunk on their own credentialed hubris and spiked punch?
Aside from serial creation and reflation of bubblicious asset markets, how are those rate cuts working out right about now? With a sudden viral loss of CON-fidence, the stock market bubble has exploded into bear territory -20%, some large over leveraged playas are on the verge of insolvency, and the already long term economic contraction (there never was a recovery) is headed into the depression dumper.
In summary, since the July 2019 rate cuts, a compromised domestic and global economic immune system, hosting a festering tumor like repo market replete with ongoing ruckus caused by duration risk plagued debentures, over medicated with increasing and permanent Fed "vaccine" booster shots, all of which have caused the comatose patient to code. Some econo-moron's are suggesting the Fed purchase equities? Just pull the plug and smother the patient with a pillow please. Long term global central bank rate induced demand anemia, economic contraction, and the insanity of another 50bps cut has resulted in nothing less than this in short order...
What can that chain reaction beget? For the economy and full of bull market, the above video subject, song and opening lyric are hauntingly apropos, I think...
As for a viral pandemic which as predicted should accelerate further mid to late March? What we are fighting against is not made of cells, can't keep itself in a stable state, does not make its own energy, and can only replicate when it occupies an area or host, from which it drains resources until dry. Lack of cell structure aside, sound familiar? The war against this novel virus will be an experiment in terror, which will expose systemic strength as well as weakness.
Worry not as much like the "terrorists" post 9/11, this bat virus will be the GO TO reporting "excuse du jour" for overpaid E-suite incompetence, repetitious monetary, economic, governmental policy blunders, and a lack of continuity and planning. At the end of the day, that single strand of RNA is not the real culprit for the markets and economic fallout. COVID19 is the Lee Harvey Oswald of viruses, patsy, fall guy, whipping post, scapegoat, trigger man and an agent of change for better or worse. For something that small (.06 to .14 microns) which many consider to not even be alive, and could have been pushed here by the cosmic wind, to only fall upon us from above, a great gig in the sky?
More to come in COVID19: The Sound Of Silence? Stay tuned, no flippin.
Recommended Reading:
2019 nCOV - Pleased To Meet You?
COVID19: Same Bat Time?
COVID19: Same Bat Channel?
COVID19: Secondary Infection?
COVID19: Bat Out Of Hell?
COVID19: Pig In A Poke?
Viruses - Lots of Them - Are Falling From The Sky
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